Power Struggle: Industry Standards

Industries across the board have a stake in the outcome of energy legislation, either because they are looking for handouts or trying to minimize harm. Some are united in their efforts, while other industries have splintered over their views on energy measures. But they’re all using money to sway the outcome of the debates in their favor. These are some of the major players, their concerns and the money they’re spending to be heard on Capitol Hill.

When gas prices go up, the public usually wants to see oil and gas companies come before the guillotine. But heads rarely seem to roll, as the industry has traditionally had a cozy financial relationship with lawmakers in Washington, particularly of the Republican variety. Now that there are more Democrats acting as the high executioners, however, the industry is fighting against punitive measures, not just for handouts. Exxon Mobil best exemplifies the defensive position the industry is in–in the first few months of this year, the company has already spent $3 million on lobbying efforts and hired 11 outside lobbying firms (in addition to its in-house lobbyists). Between 2004 and 2007, the industry’s lobbying spending jumped 64 percent, from $51.2 million to $83.9 million.

Most recently oil and gas companies have fought off a windfall profits tax of 25 percent and preserved the $17 billion in tax breaks that Democrats wanted to re-direct to renewable energy sources. Republicans say the high gas prices can be remedied not by taxing the industry but by lifting offshore drilling bans and approving oil shale exploration in western states.

The coal mining industry, which environmentalists label as one of the world’s biggest polluters, says it has the answer to addressing climate change and is trying to garner support on Capitol Hill to put its plan into action. The industry seeks funding for carbon capture and storage (CCS) technology, which takes harmful carbon dioxide from energy plants and stores it instead of releasing it into the atmosphere. Industry representatives say that CCS technology will reduce carbon emissions significantly, while sustaining economic growth and providing a clean, relatively abundant source of energy. The mining industry has so far spent $6.7 million to get its point across through lobbying, setting it on course to surpass the $22.6 million it spent last year. Nearly half of this year’s lobbying expenditures has been by the coal mining industry alone.

Environmentalists remain skeptical over the new technology. Green groups say that because the method isn’t expected to be commercially available until 2030, it won’t make an impact until it’s too late. Environmentalists also say that nobody has proven that the CCS will work with full-size power plants or that it won’t leak harmful gases into the atmosphere anyhow. They also worry that CCS could double the operating costs of power plants. Although lawmakers are taking seriously the concerns of environmentalists, the mining industry has already spent nearly twice what the eco-friendly groups have on lobbying this year.

The nuclear power industry, which already produces about 20 percent of the country’s electricity, is certain it can meet the growth in demand for emission-free electricity while creating local jobs. It’ll just take a little bit of financial help from the federal government. The industry supports an extension of the Department of Energy’s loan guarantee authority, leaving it up to the federal government, rather than banks, to take a risk on new nuclear power plants. Environmentalists, however, are vocal about their concerns related to nuclear energy. They fear that subsidies or loan guarantees to the industry take away from investments in renewable energy technology. These groups say that nuclear power plants lack enough federal oversight and fear there’s no viable way to store radioactive waste.

Similarly, coal-fired power plants call for funding for carbon capture and storage (CCS) technology, which takes harmful carbon dioxide from energy plants and stores it, instead of releasing it into the atmosphere. The industry says that it must be part of the energy mix because other fuels for generating electricity (such as nuclear power) will take too long to meet demand for electricity. Although coal produces more than half of the nation’s electricity, proposed coal-fired power plants have been canceled around the country in light of global warming concerns.

Electric utilities, which have already received billions of dollars in subsidies, have spent $34.2 million lobbying in the first quarter of this year, setting the industry on course to surpass the $112 million it spent last year. These companies have already spent nearly 10 times what environmentalists have spent on lobbying this year and, for the first time since the 1994 election cycle, have given nearly half of their contributions to Democrats.

Chrysler and General Motors plan to stop production at multiple plants that make gas-guzzling SUVs, trucks and vans. Auto sales are the worst they’ve been in 15 years. And American Airlines will cut 6,500 jobs by the year’s end, while Continental is slashing 3,000 and grounding 67 jets. For many of the industries in the transportation sector, it’s not business as usual on Capitol Hill. It’s a fight for their survival in a political environment that’s hostile both to what goes in a car (gas) and what comes out (carbon emissions).

Even as automakers continue to fight against more stringent fuel economy standards, they’re also asking Congress to help them meet the inevitable new standards, wherever they are finally set. Auto company executives have asked lawmakers to provide incentives to the industry to continue researching new technologies and to the public to invest in new technologies. Like many other industries, automakers are shifting their campaign contributions toward Democrats. For the first time since the 1994 election cycle, nearly half of their contributions have gone to the party. Other transportation industries will be increasing their lobbying efforts in support of a bill to authorize $1.7 billion to expand public transportation. In the meantime, the Air Transport Association has formed a coalition of energy users that supports limiting speculative investments in energy, pitting truckers, farmers and consumer groups against Wall Street.

While environmentalists are surely concerned about the cost of gas (though many probably ride bikes and drive hybrids), their biggest concern is the health of the environment–slowing global warming, preserving pristine wilderness and promoting energy sources that leave the smallest footprint on the planet. Environmentalists might live green, but they don’t have much green to offer politicians. Compared to the industries they’re up against, environmental groups have very little money to give to federal candidates, parties and politicians. In the first three months of this year, Exxon Mobil alone has spent nearly the same amount on lobbying as all environmental groups put together.

Democrats, who happen to be the majority, are pushing an eco-friendly agenda, however. This has included a mandate to sharply cut greenhouse gas emissions by up to 65 percent over the next 40 years, a “cap-and-trade” system that provides a financial incentive to reduce harmful emissions and eliminating billions of dollars in tax breaks to the oil and gas industry to fund renewable energy research and development. Environmentalists are also fighting the coal industry’s push for carbon capture and storage, which environmental groups say will take too long to be effective and comes with too many risks.

Alternative energy companies are relatively new to the Capitol Hill scene and have spent very little money on politics so far. But with high gas prices, international concern about global warming and the floundering economy, their future is looking bright (in an energy-efficient kind of way, of course). The industry wouldn’t mind seeing a mandate to cut greenhouse gas emissions, forcing others to rely more heavily on new renewable technology. These companies say they could also use a little bit of help, like the billions of dollars that could come from eliminating tax breaks to oil and gas companies. But so far Republicans have succeeded at blocking debate on legislation that would extend tax credits for wind, solar and other renewable energy sources.

Alternative energy companies are clearly ramping up their campaign contributions, already doubling what they gave in the 2006 election cycle and more than tripling the last presidential election cycle. Seventy-five percent of the nearly $800,000 the industry has given to federal candidates, parties and committees so far this election cycle has gone to Democrats. Having already spent $6.6 million on lobbying in the first quarter of the year, the industry is also on track to spend far more than the $16.3 million it spent last year to make its voice heard in government.

In general, the agriculture sector supports a cap-and-trade system that would pay producers for voluntarily reducing greenhouse gas emissions. The industry opposes any measures that call for mandatory reductions in carbon emissions, arguing that this would increase fuel, fertilizer and utility costs to farmers. The industry is split, however, over the issue of ethanol, which is fuel made primarily from corn in the United States. Since last year’s energy bill mandated increased production of ethanol and provided subsidies for farmers who grow corn for the fuel, biofuel has been blamed for rising food prices around the world. Corn growers obviously support the measure, which increases demand for their product. But dairy and beef producers are saying that the mandate to turn more corn into ethanol is boosting the cost of feed for their livestock, which gets passed on to consumers. So far the crop production industry is winning on the lobbying front–it has spent $6.1 million on lobbying efforts in the first three months of the year, compared to the nearly $2 million the dairy and livestock industries have spent.

The agriculture sector overall has spent nearly $33 million on lobbying so far this year, setting it on course to surpass the $109.1 million it spent last year. It will likely at least match the contributions it gave to federal candidates, parties and committees in the last election cycle–so far it has given $37.4 million, compared to $44.7 million in 2006.

At the corner of Wall Street and K Street converge a number of debates, among them the cause of high oil prices. Congress has been considering legislation that would restrict the ability of financial companies to buy futures contracts, which some lawmakers contend has driven up gas prices. The securities and investment industry is arguing against this with all of its might, trying to preserve the highly profitable trading. According to the Washington Post, investors “have sharply increased their commodity allocations since 2003, from $13 billion to $260 billion, making financial actors an even larger force on these markets than farmers, airlines, trucking firms and companies that buy and sell the physical goods to run their businesses.”

Securities and investment companies certainly aren’t shy about throwing their money at the causes they care most about–in the first three months of 2008, the industry spent $23.6 million on lobbying efforts, setting it on course to surpass the $87.3 million it spent last year. The industry is ranked ninth for lobbying spending in the last three months, four spots behind the oil and gas industry. It is ranked third, however, for campaign contributions for the cycle, so far giving $94.5 million to federal candidates, parties and committees. In the last presidential election cycle, the industry gave $97.7 million.

Hedge funds, too, have been on the defensive. The GOP effectively killed a bill that would have raised taxes on hedge-fund managers to pay for tax credits for wind, solar and other renewable energy sources. So far this cycle, hedge funds have given $11.3 million in campaign contributions, more than twice what this subset of the investment industry gave in 2004. It has also spent $1.8 million on lobbying.

According to the National Federation of Independent Business, energy costs are ranked the second-highest problem for small business owners this year. The group has backed several proposals to ease some of its members’ economic woes, including suspending the federal gas tax from Memorial Day until Labor Day and exploring domestic energy supplies (though the federation emphasizes the importance of doing so in a way that is friendly to the environment). Other business associations fear that some cap-and-trade systems would result in job loss to foreign companies without tougher pollution standards.

While business associations don’t give a lot of money to federal candidates, parties and committees, they are major players on K Street, fueled mostly by the U.S. Chamber of Commerce, which has spent more money on lobbying than any other group, in any industry. The Chamber, which has spent $14.5 million on lobbying efforts so far this year, opposed the Senate’s climate bill that was killed last month, stating that the bill would create a major regulatory burden by creating more than 300 mandates, and would eliminate jobs rather than create them. According to the Chamber, the measure didn’t provide enough funding for non-fossil-fuel technologies and, rather than implementing a cap-and-trade system, should have pushed to replace fossil fuels entirely with low-carbon alternatives.

Published by Irene Kan and Lauren Pick on July 10, 2008 If there’s one dreaded stop on every traveler’s roadmap these days, it’s the gas station. With the cost of fuel topping $4 a gallon this summer for the first time ever, there are a lot of questions, but not many clear-cut answers. Capital Eye’s reporters dropped in on service stations in the D.C. area to find out where consumers are placing the blame…. (Continue)

Published by Irene Kan and Lauren Pick on July 10, 2008 The correlation between federal lobbying by the oil and gas industry and oil prices (per barrel) is obvious, as shown in this chart. As to whether this is a case of cause-and-effect, we leave that to you to decide…. (Continue)

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